Vast reserves of lithium in Atacama Desert, Chile

In the middle of the desert in northern Chile, pools are filled with salty groundwater that contains lithium. It's a key component in the rechargeable lithium-ion batteries for electric cars, solar panels and other green technologies. The International Energy Agency is projecting a more than 40-fold increase in demand for lithium by 2040.

This is despite growing environmental concerns about the impact of lithium extraction. Chile is considered one of the largest lithium producers after Australia. In South America the counties Argentina, Bolivia and Chile are known as the "lithium triangle," together holding more than half of the world's proven lithium reserves.

Chile has strict mining regulations and the production permits involves securing approval from the nation's nuclear energy commission since the metal can be used in nuclear power and weapons.

Lithium demand to create lasting high prices

The past two years has seen lithium prices rise about ten fold for both for lithium hydroxide, spodumene and carbonate. This has been caused by EV sales booming, resulting in a huge demand wave for lithium. Many EV metals experts agree we have only just entered a lithium supercycle.

The size of the demand wave needed to feed the electric vehicle boom will put more strain on the supply of lithium components. With each EV requiring about 45kgs of lithium carbonate and electric car sales being in their millions last year, the market needs about 9 new mines globally, just to catch up with demand.

A lithium deficit can only mean lithium prices stay ‘stronger for longer’ this decade provided electric car sales remain in a state of growth, we are likely to see constant lithium deficits this decade. A lithium deficit can only mean lithium prices stay stronger for longer.

What this means for local lithium mining companies

Sebastian Diaz, Chief Operations Officer from Chile based Lithium company SolarBio Energy recently commented on how SolarBio have been preparing for this supply and demand situation since 2019.

“We knew from the beginning of the pandemic that once everything had to began to subside that EV vehicles sales would rocket. This resulted in our company being prepared for many possible outcomes with the expansion of mining operations including new factories and the employment of many new individuals.”

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